A financial consolidation, that is, a consolidation of financial statements, is performed when a parent company owns at least one other company. A financial statement normally includes a profit and loss statement, a balance sheet, and a cash flow. At the end of each period, such as daily, weekly, monthly, quarterly, year-end, or any other arbitrary time span, the books are closed for all group companies and then consolidated to one financial statement. The consolidation process may include some mandatory adjustments, such as translation of foreign subsidiaries, elimination of inter-company transactions, minority calculations, and eliminations of shares in subsidiaries.
The consolidation process is critical, since it is imperative that top-level (corporate) numbers are reported on time each period end. In large corporations with complex reporting structures, the challenge to close books in the shortest time possible is significant. Meeting the period deadline is critical, in many cases legally required.